Football is not a business, as Crystal Palace shows

The myth has been around for long enough now. “Football is business,” proclaimed The Independent when the Glazers took over at Man Utd. “The Football Business” runs the title of a book by David Conn of The Guardian. There are even university courses about the link between football and business.

Maybe it was true once, but since the arrival of Roman Abramovich, followed by the Glazers, Randy Lerner, Thaksin Shinawatra, George Gillett, Tom Hicks and many and various others, football has become little more than a rich person’s playground.

According to one estimate, Abramovich has spent at least £600m on Chelsea since he arrived in 2003. He and Randy Lerner at Aston Villa are held up as the ideal type of foreign owner, for, as David Conn puts it rather euphemistically in the Guardian “investing” millions in their clubs. But this is not an investment. As Abramovich shows, this is spending with little hope of return, at least financially. Perhaps there might be some returns in terms of status or prestige, but financially, football no longer pays.

Once, Charlton was praised as the country’s “best run club”. Financial prudence and managerial stability saw this relatively small south London club win promotion to the Premier League and remain there for six years. Now they languish in English football’s third tier, gone from beating the likes of Liverpool to falling to 3-0 losses at Colchester. The effort of staying in the top division for so long left the club with debts of £37m, and, as so many others are forced to, it had to go looking for wealthy backers.

Now their place as minnows punching above their weight in the Premier League has been taken by Wigan. But unlike Charlton, Wigan are not a self-made club. They are backed by another rich man, Dave Whelan, who, as Rob Bagchi has argued, has artificially elevated the club way beyond its natural position.

And this week there was the saga of Crystal Palace. The club entered administration this week for the second time in just over a decade. But unlike Leeds Utd before, Palace were not a team that had gone all out for Champions League glory, spending whatever it took to get there. They have not been in the Premier League since 2005. Their highest profile player is Victor Moses, the young British striker from whom they paid nothing, having brought him up through the youth ranks, and who has been chased by several Premier League clubs in recent weeks, including, reportedly, Spurs and Liverpool.

Part of the problem is that Palace are now playing in the same league as QPR, which is controlled by the combined financial power of Lakshmi Mittal, Flavio Briatore and Bernie Ecclestone. It is becoming increasingly difficult for clubs without that muscle to compete even in the lower leagues.

Knowing this, Simon Jordan, Palace’s owner, put money and effort into its youth system, into cultivating players like Victor Moses and like John Bostock. Bostock was the teenage sensation who delighted Palace fans and was destined to become the anchor around which they based their midfield. But aged 16, the player decided to let his contract run out and join Spurs. Palace were compensated for the asset they had lost, the value of which was set by a Football League tribunal at £700,000. That was £200,000 less than Chelsea had offered when the player was just 14 and £4m less than Jordan had hoped for.

That was the moment it became clear the writing was on the wall for football as business. If a club that cannot compete in the transfer market, backed by wealthy owners willing to lose money, cannot rely either on home-grown assets being worth anything, it cannot survive on its own terms. There is no chance of what the corporate world might call “organic growth”. Clubs like Palace face two choices: get bought out or forget about competing at the top level.

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Christopher Cook is an FT editorial writer. Before joining the FT in 2008 as a Peter Martin Fellow, he worked for three years for the Conservative party.

Lorien Kite is deputy comment editor, a post he took up in 2009 after four years as a commissioning editor on the analysis page. He joined the FT in 2000.

Ian Holdsworth became assistant features editor in 2009 and was previously chief production journalist for the features pages.